Annika Kropf 's book on the Arab Gulf States’ Oil Export Economies sees the light at a crucial time in the economic history and development trajectory of the six GCC countries. Their process of economic diversification has reached a crucial crossroad: faced with the sudden and unexpected collapse in oil prices, the time has come for them to demonstrate that progress has indeed been achieved towards reduced reliance on oil and gas production and exports, and economic growth may continue even in the face of substantially reduced hydrocarbon income.

The need for oil exporting countries to diversify their respective economies and progressively reduce dependence on oil as a source of income has long been recognized and paid at least lip service. Whether justified by the prospect of eventual exhaustion of underground resources – however remote in time this might have been judged to be – or by the fear that sooner or later technological development might make oil less economically relevant (the Stone Age did not end for lack of stones1), the need to reduce dependence on oil income has been a mantra in all official and scholarly literature.

Such unanimity has largely hidden the fact that we do not very well know what successful economic diversification should consist of. Besides the well understood difference between growth and development - suggesting that the latter is better measured in terms of human development outcomes such as education, health care, life expectancy, respect for human rights and more – it is not at all clear which economic structure will best be suited to guarantee a future to the oil economies: is it large scale capital intensive industry (be it oil or non-oil related)? Or small and medium scale manufacturing (dependent on expatriate labor)? Or logistical, financial and other services? We witness divergent models and outcomes, with individual countries faring very well or very badly, depending on the exact cocktail of indicators chosen.

The new phase of lower oil prices - which may well be rather long-lived - will provide us with some very interesting insights. As long as terms of trade are favorable to oil producers, the extent and viability of diversification remain clouded by multiple sources of ambiguity. National account indicators have much less precise meaning that is frequently attributed to them, and statistical effects hide underlying realities.